New cars are going to cost less because of reductions in VRT (Vehicle Registration Tax). But the reductions are far from dramatic - perhaps up to £100 on a £10,000 small car. Many motorists will not have to pay any more for petrol following the budget. The Minister for Finance selectively imposed an increase of 4 pence per litre (18.17 pence a gallon) on super unleaded and leaded petrol, but he did not put any increase on normal unleaded petrol. Diesel fuel is also unaffected.
Mr Derek Moffatt, marketing director of Texaco, estimated last night that at least 70 per cent of motorists would not be paying more at the pumps. "We welcome what the Minister has done: it is clearly environmental. The fact is that normal unleaded, which is 95 octane, is suitable for the vast majority of new or newer cars on the roads."
He felt the Minister was also keen to keep the balance in favour of motorists in the Republic vis-a-vis Northern Ireland. Currently, normal unleaded is up to 10 pence per litre (45.44 pence a gallon) cheaper in the Republic and the currency differential accentuates the difference further.
There was some confusion in the motor trade last night about the exact size of the decreases in car prices, which take effect from January 1st. Toyota Ireland estimated that its Corolla, with a list price of £13,790, would come down by about £86, while Fiat Auto Ireland said the reduction in the £7,250 Cinquecento would be around £59. The Society of the Irish Motor Industry and other importers including Ford suggested the VRT changes meant a £100 cut on a £10,000 car such as the entry-level Fiesta (£10,105) and £1,000 on a £50,000 model. But Lexus Ireland put the reduction on its flagship model, which is £73,500, at about £845.
However, most companies were enthusiastic about the Budget. The SIMI, representing importers and retailers, had argued for a 20 per cent rate of VRT, claiming that VRT was against the spirit of the EU's open market and a systematic reduction was needed.
The SIMI chief executive, Mr Cyril McHugh said: "The reductions may not have been what we were looking for, but bringing VRT down from 23.2 to 22.5 per cent and from 29.25 to 28 per cent was a useful move. Hopefully, it's the start of a continuing reduction downwards."
He also welcomed the increase in the capital allowance for cars from £15,000 to £15,500. "We wanted £16,000, but the Minister kept in line with the figure for a 1.6 litre car. Taking the Budget in its total context, it will be good for the motor industry because it is very expansionary."
Mr Eddie Nolan, chairman and managing director of Ford in Ireland, felt the reduction in personal and corporation taxes would do much to sustain the momentum that currently characterised the economy.
"It's an important first step both towards redressing the imbalance between ourselves and our European counterparts and towards stemming the influx of used car imports into the country."
A more discordant note was struck by Mr Arnold O'Byrne, managing director of Opel Ireland who said he was "very disappointed".
The VRT reductions were not enough, he said, particularly because the Republic was expected to harmonise its tax structure with other EU countries. "They will not be enough either to stop the flow of used car imports which is threatening the traditional retail industry here."
Mr Conor Faughnan for the Automobile Association was annoyed that there was a 4 pence per litre imposition on leaded fuel, claiming it was "a huge blow" to owners of older cars.
"There are hundreds of thousands of cars out there that still need to use leaded petrol. It is not just old bangers."
A litre of leaded petrol that, on average, cost 65.1 pence will go up to 71.9 pence. Unleaded varies from 57 pence to 65 pence, depending on location.